U.S. lawmakers drop IMF reforms from Ukraine aid bill

WASHINGTON, March 25 (Reuters) - U.S. Senate Democrats agreed on Tuesday to drop language outlining reforms of the International Monetary Fund from a Ukraine aid bill to increase the odds it will get through Congress, said Majority Leader Harry Reid, after weeks of partisan bickering delayed the package.

Reid cited stiff opposition to the IMF reform provisions in the Republican-led House of Representatives.

"A majority of the Senate would have liked to have gotten that done with the IMF in it, but it was headed to nowhere in the House," the Nevada Democrat told reporters.

The Senate bill backs a $1 billion loan guarantee for the government in Kiev, provides $150 million in aid for Ukraine and neighboring countries and requires sanctions on Russians and Ukrainians responsible for corruption, human rights abuses or undermining stability in Ukraine.

Supporters of the bill want it passed to help shore up Ukraine's economy and send a unified message to Russian President Vladimir Putin to discourage him from moving further westward into Ukraine or other neighboring countries.

The measure has broad support in Congress. Many lawmakers want to do even more for Ukraine, including providing defensive weapons and non-lethal military supplies.

The bill is expected to pass through Congress and be sent to President Barack Obama to sign into law this week, as long as another simmering dispute - over whether to include increased natural gas exports in the bill - does not hold it up again.

Reid said Senate leaders reached an agreement to vote on final passage on the bill on Thursday. The House is also expected to move quickly.

The Ukrainian crisis has led to intense scrutiny of export rules for U.S. liquefied natural gas. A number of lawmakers, led by Republicans, have been pushing to change the system to help U.S. allies reduce their dependence on Russian energy and suggested amending the Ukraine aid bills with measures to increase exports.

Reid said he would not allow a vote on an LNG amendment from Republican Senator John Barrasso of Wyoming, and said he did not want any provisions that might delay the legislation. Opponents of such energy measures, including many Democrats, worry that increased exports could raise prices for U.S. consumers.

"It's time to send a message to Putin," Reid said, adding he expected more Ukraine-related legislation in the weeks ahead and the energy measures could be addressed then.

HOUSE BILL

The House of Representatives' Foreign Affairs Committee passed its version of a Ukraine bill including sanctions and penalties and backing the loan guarantee earlier on Tuesday, paving the way for its consideration by the full House.

Citing a desire to keep controversial measures out of the Ukraine bill, House Foreign Affairs Committee Ed Royce, a California Republican, did not include the IMF reforms or energy amendments in his bill. House lawmakers will instead consider LNG legislation separately.

The White House has been pushing Congress for a year to approve a shift of $63 billion from an IMF crisis fund to its general accounts. Administration officials have said Washington must make good on a commitment from 2010 and maintain U.S. influence at the lender while strengthening an institution playing a key role in stabilizing Ukraine's weakened economy.

But Republicans balked and some lawmakers complained that the reforms would cost too much at a time of deficits and budget cuts or lessen U.S. influence at the IMF, which supporters of the reforms denied.

Democrats, including Reid, in turn accused Republicans of tying the IMF reforms to their desire to keep the Obama administration from changing the rules for how conservative non-profit groups can contribute to political campaigns.

"It's simply irresponsible that the Republican leadership insisted on holding IMF reforms hostage in an effort to protect their special interest campaign contributors' ability to pour money into the system unchecked," White House senior adviser Dan Pfeiffer said in a statement after Reid's announcement.

Christine Lagarde, the managing director of the IMF, said in a statement she would continue to work for the reforms.

Democratic Senate leaders said they would try to pass the IMF reforms separately. This could become more difficult later in the year, when partisan divisions become more intense ahead of November's congressional elections. (Additional reporting by Anna Yukhananov and Richard Cowan; editing by G Crosse)

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